We are all capitalists, in the sense that we may point to one thing or another and call it ‘mine’. The Marxist notion that ‘private property is theft’ is all but dead outside of the most extreme and chronically naive positions.
It is often said that communitarian or communist ideology which espoused the principle of ‘common ownership’ was great in theory but ineffective in practice. This sentiment, however is self evidently false. Any political ideology which does not work in practice is de facto a poor theory.
Having established that we are all capitalists in this particular sense, this article argues that in order to maximise ethical value within the macro-economy the private sector and its chief operating principle, the market mechanism, must be encouraged within a well regulated framework.
This article initially considers what it is we mean when we talk about ‘ethics’, followed by a discussion setting out how the democratic and legal system in effect puts our sense of ethical values into a practical set of laws. This is followed by a positive assessment of utilitarianism explaining how capitalism is the only effective mechanism to achieve the optimum level of efficiency within any given economic paradigm.
Finally I offer a critique of the emergent managerial aristocracy which appears to be strangling private sector progress. I argue that this class of economic agent presents the greatest danger to the efficient progress of the macro-economy.
What Are ‘Ethics’?
Attend a course of moral philosophy or ethics at a University in the developed world and it would be explained there are three central theories. Firstly the school of deontology, led principally by Kant which suggests ethics are about duty and obligations. In order to be ethical one should ‘love thy neighbour’, for example.
The second major school of ethics is that of utilitarianism led by Bentham and Mill in the late 19th century. The crucial maxim here, being that ethics are simply about the maximisation of happiness for the greatest number.
The final system, if one can call it that, is described as ‘virtue ethics’. This more vague construal, dates back to Aristotle’s ‘Nichmachean Ethics’ and offers the idea that in order to determine what is ‘ethical’ or ‘good’ one has to do the right thing at the right time for the right reasons. In order to deter mine what might be the appropriate course of action in any given situation, one would be advised to consult a ‘moral expert’ who one would consider had the requisite skill to elicit what that might be on a case by case basis.
Of course there are many more conceptions of ethical value including the nihilisits, the atheistic existentialists, the prescriptivists and the intuitionists as well as the anti-realists. What is common to a majority of the major theories, aside from nihilism is the idea that in order to gain an understanding of appropriate ethical behaviour one had to be able to either experience empathy for others or understand situations when one ought to have empathy for others.
This distinction is important given that there are a minority of individuals who have an impairment in their empathetic response, but who nevertheless understand that there are certain situations in which one ought to at least act as if one had empathy in a given situation.
The Capitalist System
Adam Smith points out in the Wealth of Nations that it is individuals collectively acting in their own self interest that creates an efficient economic system. The idea that acting selfishly is in everyone’s best interest appears on the face of things to be counter intuitive, however, the idea can be explained in more modern terms.
What is evidence from an analysis of Smith’s economic model is its commitment to the principles of utilitarianism, indicating that this paradigm will give rise to the greatest happiness to the greatest number. In a modern liberal capitalist economy, private enterprise, despite the more recent marketing phenomenon of alleged ‘social concerns’, has one simple goal: profit.
All private commercial activity, regardless of sector or geographical region pursues the goal of profit to the best of its ability. In order to maximise profits, however, one must be able to service the ‘client’ of any given enterprise to the best of one’s ability and not only that, it must provide the best product at the most competitive price. This concept is known as ‘productive efficiency’.
Companies who provide a substandard service or who charge too much for their goods or services will simply fail. In short, capitalism ensures that firms, in the pursuit of their own self-interest, must have the highest regard for their customer’s wants and needs. The most successful enterprises attempt to ‘delight’ the customer in order to grow.
In addition to the benefits derived from ‘productive efficiency’, the market mechanism also benefits from the principle of ‘allocative efficiency’. This principle ensures that what is produced by companies is determined by the customers. Customers signal their preferences by either expressing demand for particular goods and services or not.
Producers are aware of customer behaviour in virtue of their economic activity and adjust their supply in accordance with those preferences. In short, the market mechanism produces the goods and services which are demanded by the customers at the best quality and at the best prices.
It would, however, be incorrect to suggest this is the end of the story. The market mechanism does fail in a number of crucial areas.